AB InBev, SABMiller explore a mega merger

Big news in the beer world. Anheuser-Busch InBev (AB InBev), the world’s largest brewing company and SABMiller, the second largest and the owner of such Nigerian brands as Trophy lager beer and Castle from the stables of International Breweries and Hero lager by Onitsha based Intafact Beverages on Wednesday, 16th September said both companies were exploring a mega tie-up. A mega merger of this magnitude would create a beer company controlling approximately 30 percent of global beer volumes.

SABMiller said that AB InBev intends to make a proposal to acquire the company, but no such offer has yet been received. SABMiller further said it will deliver an announcement on the takeover by no later than 5:00pm on 14 October, by which time a formal proposal by AB InBev must be made, the company revealed. SABMiller, though a South African company, is registered in the United Kingdom and the rules there require a proposal to be made by that date and time.

Euro-Monitor data shows if the merger were to go through, the new company would own 18 of the world’s 40 most popular beer brands (by volume).

The New York Times says “a deal would crown years of global consolidation of the brewing industry “and lead to “a climatic round of regional disposals, spins and amalgamations.” It adds that, in the wake of anti-trust concerns, mandatory disposals might bring opportunities for Heineken, Carlsberg and Diageo.

But Bloomberg News Service observes that life could get tougher for rival beer companies. “The merged entity would force competitors to become more efficient.”

The combined company would create a “$245 to $275 billion hyper profitable brewing empire” and this would put antitrust authorities on high alert, warns The Washington Post.

What does this mean for us here in Nigeria and Africa? Buying SABMiller would strengthen AB InBev’s hold in growing economies in Africa and Asia, says NBC News. As profits wane in the Americas, AB InBev wants to expand into Africa. Enticingly, SABMiller has a huge presence in Africa, the next beer frontier.

“The days of big profits in the U.S. are gone,” said Jonny Forsyth, a global drinks analyst for Mintel, the market research firm. “They have to position themselves in the big beer growth market for the next 10 years,” adds NBC.

In Nigeria, the merger would give AB InBev a foothold in the Nigerian brewing space, considered the second largest on the continent. AB InBev would take ownership of all SABMiller’s breweries and brands in the country including International Breweries in Ilesha, Intafact Beverages in Onitsha, Pabod Breweries in Port Harcourt, among others. It would also bring about stiffer competition between the beer rivals of Diageo’s Guinness, Heineken’s Nigerian Breweries and the new company that emerges from the merger of SABMiller/AB InBev. Who knows, this might actually force another round of mergers between rivals, Guinness Nigeria’s, Diageo and Nigerian Breweries parent, Heineken.

At this stage, analysts think the bid has a long way to go before reaching fruition. “In Bev’s acquisition of Anheuser-Busch in 2008 took five months from initial bid to completion.”